How to defend against the rising tide of corruption

Source: PWC

Naturally, working to prevent corruption is high on the to-do list for ANZ's Chief Compliance Officer, Mark Evans and Group General Manager Compliance IIB, Freya Hone. They sat down to speak to BlueNotes and started by addressing the implications of the PwC study.

ME: I don't think corruption is rising in itself. I think what's happening is there's more reporting and visibility into what's happening and less tolerance at both a political and regulatory level – not to mention from the person in the street.

The other big change is new laws in the UK and US which extend the prosecutorial reach of developed countries into emerging economies.

It's no surprise there have been a lot of corruption cases in emerging markets where legal and regulatory maturity is still developing. What's different now is there are reporting and legal consequences when corruption is detected.

FH: As well as the increased spotlight, it is difficult for large groups to have a consistent approach across different markets which might have different levels of regulatory maturity and varying legal frameworks.

There are many challenges including understanding the differences in regulation across geographies as well as the inconsistencies in supervising and enforcing such regulation. In some developing economies there is minimal regulation and it may not even be enforced.

The difference between the anti-corruption standards of international companies who are based in developed markets can often be at odds with the approach in emerging markets.

At ANZ we use the most onerous requirements which currently come from the UK Bribery Act. This means in many other countries we are in excess of local requirements.

We have to engage frequently with regulators so they are familiar with our standards and can understand the extra jurisdictional reach which applies to a business like ANZ  as well as our own zero tolerance position on bribery and corruption.

Different customs on the ground can further complicate things.

ME: We know from operating in 34 countries there are different cultural practices in different markets. For example, in the Pacific it can be the custom to give a bank teller a gratuity to say 'thank you' for banking services. That would not happen in Australia.

This is where market insight and working in partnership with regional stakeholders can pay off.

At ANZ, we wouldn't know as much as we do about market practices without the knowledge of our people on the ground. We have to be careful not to offend customers - for example by saying we won't accept a gift - but what we do have are clear controls to help people manage that sort of situation and say 'we've recorded it and donated it to an acceptable cause'.

We also have a role to play to be a respected member of society and there's now a heightened role for banks in the detection of corruption, as well as other forms of illegal activity such as sanctions evasion, money laundering, financing of terrorism and tax evasion.

In a global economy this is particularly important. We can work with developing economies to try and accelerate their maturity around corruption. This is important, because even if you have a strong framework in Australia or Singapore, illegal money which ends up in those countries can originate in countries with weaker standards.

FH: Raising standards globally works in everyone's interests. When we communicate with our many regulators across our footprint, our desire is to help bring them up to an international standard or take their knowledge and apply it elsewhere.

They want to take advantage of being more international and get the benefits of trade flows and participating in the global economy,.

When we're transparent and prepared to talk about what we're doing, there is a real interest to know how we do this, and the regulation needed to get that in play. This is better for the bank and the economy as a whole.

ME: This year we did a risk assessment on bribery and corruption across the bank. We worked with Transparency International to benchmark ourselves and identify markets which are potentially higher risk.

We then paired this insight with information from our people in those markets about the controls we need to put in place. One example of this is working with governments, for example in the Mekong region, about best practice in anti-money laundering.  

Ultimately, we want people to be inquisitive and ask why they might have been offered money and the impact it might have. If everyone understands this it will lead to a better outcome all round.

Mark Evans is ANZ Chief Compliance Officer and Freya Hone is Group General Manager Compliance IIB